IS A POTENTIAL “COPEC” POTENT AT PROTECTING COCOA FARMERS?

In the year 2020, Ghana and Ivory Coast leveraged their cocoa production dominance to capture some extra value i.e., the Living Income Differential (LID) levy that granted cocoa farmers $400 extra income for a metric ton of cocoa beans sold. At the back of this is what was referred to as “COPEC”, the Cocoa sector’s version of “OPEC”, as a potential cartel that can protect the interest of cocoa-producing countries.

In this article, I will assume “COPEC” as the working name for an organisation of cocoa-producing countries. I will argue that “COPEC” should work “with” not “for” politicians and Lead firms with a business-biased interest in the cocoa value chain, to alleviate cocoa farmers from endemic poverty. I will give an overview of OPEC and argue that it was formed at the “Right time” hence making the organisation impactful and relevant to its mission to protect its interest from those of the western oil marketing firms. I will juxtapose this with the cocoa sector and highlight how COPEC though sounds like a good idea will have less impact as compared to if it was formed during the 1950s after Independence.  I will conclude with some policy recommendations that can make “COPEC” an impactful cartel that can flip the script and fairly protect all the actors in the cocoa-chocolate value chain, especially the Smallholder Cocoa Farmer.

OPEC (ORGANISATION OF PETROLEUM COUNTRIES)

OPEC countries, for example, were a victim of natural resource exploitation due to the economic, financial, and technological power Western Oil Companies (WOC) had over them. WOC used this power to exploit the Crude Oil of the now OPEC and locked them out in even having a say in the price of Crude Oil until the formation of OPEC. WOC invested in the oil exploration on the lands of OPEC, vertically integrated that upstream sector to their existing downstream networks and became dominant in the oil industry. They took charge of price setting and set prices of crude oil very low so that they can buy it cheaply for refining into more valuable products like gasoil, gasoline, etc., in their refineries in their home country (outside of OPEC). This exploitation continued for years and heavily affected the economic growth of OPEC countries as 90% to 99% of their foreign exchange came from crude oil exports in the 1960s. OPEC realized they were supplying over 70% of the global oil needs during the industrial revolution from the 1970s and sensed the long-term global dependence on oil as a necessity product. Realising this opportunity, they came together as a strong unit, and took over the control of the entire activities within the upstream sector including the unilateral setting of prices of crude oil and the distribution of oil concessions, hence the formation of OPEC.

They unilaterally increased crude prices by an estimated 40.25% and further by an estimated 127.6%. This exchange and utilization of power from the WOC to OPEC saw OPEC increasing its balance of trade surplus from $8bn in 1973 to $114bn in 1980.  Europe and United States on the other hand recorded a balance of trade losses of 42.6% and 29.3% respectively within that same period. This can be argued as a fair redistribution of value within the Oil & Gas value chain for the benefit of OPEC.

Graph 1: 1971 – 2003: OPEC Takes Over From TRC